Moody’s changes TSB to negative

Moody's Investors Service said it affirmed all ratings of TSB Bank plc and TSB Banking Group plc.

The outlook on the Baa2 long-term deposit and issuer ratings and TSB Group's Baa3 long-term issuer rating was changed to negative from stable.

Moody's also affirmed TSB's baseline credit assessment and adjusted baseline credit assessment at baa2, as well as its counterparty risk assessment at A3(cr) / Prime-2(cr).

The negative outlook reflects the downside risk to TSB's franchise as a consequence of the bank's prolonged IT issues following its IT migration, the agency said.

In April, TSB migrated its IT system to that of its parent, Sabadell, and has since recognized £176 million in post-migration costs related to customer compensation, additional resources and foregone income because of waived overdraft fees and interest charges.

The result has been a £107 million pre-tax loss during the first half of the year, reducing the common equity tier 1 ratio to 19.2% at the end of June from 20% at the end of 2017, the agency said.

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